The Role of Goals and Feedback in Incentivizing Performance

Abstract

In this paper, we experimentally investigate how goal setting and feedback policies affect work performance. In particular, we study the effects of (i) absolute performance feedback, (ii) self-specified goals, and (iii) exogenous goals and relative performance feedback. Our results show that the average performance of the subjects who are provided self-performance feedback is 11% lower than the ones who obtain no feedback. Moreover, setting a non-binding personal goal does not affect performance. Finally, assigning an exogenous goal and providing relative performance feedback decreases performance by 8%. We discuss the insights our findings offer for the optimal design of goal setting and feedback mechanisms. Copyright © 2015 John Wiley & Sons, Ltd.